Category Archives: Employment Law

DOL May Change Its Approach to Joint Employers

This week the United States Department of Labor announced a proposed rule to revise and clarify its  joint employer test.

The Department proposes a clear, four-factor test that would be used to consider whether the potential joint employer actually exercises the power to:

  • hire or fire the employee;
  • supervise and control the employee’s work schedules or conditions of employment;
  • determine the employee’s rate and method of payment; and
  • maintain the employee’s employment records.

The proposal also includes a set of examples for comment that would further help clarify joint employer status.  I have set forth two of the examples below which illustrate when joint employer status will and will not exist under the proposed new rule:

    Example:  An office park company hires a janitorial services company to clean the office park building after hours. According to a contractual agreement with the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services. However, office park personnel do not set the janitorial employees’ pay rates or individual schedules and do not in fact supervise the workers’ performance of their work in any way. Is the office park a joint employer of the janitorial employees?

    Application:  Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment. The office park’s reserved contractual right to control the employee’s conditions of employment does not demonstrate that it is a joint employer.

 

    Example:  A country club contracts with a landscaping company to maintain its golf course. The contract does not give the country club authority to hire or fire the landscaping company’s employees or to supervise their work on the country club premises. However, in practice a club official oversees the work of employees of the landscaping company by sporadically assigning them tasks throughout each workweek, providing them with periodic instructions during each workday, and keeping intermittent records of their work. Moreover, at the country club’s direction, the landscaping company agrees to terminate an individual worker for failure to follow the club official’s instructions. Is the country club a joint employer of the landscaping employees?

    Application:  Under these facts, the country club is a joint employer of the landscaping employees because the club exercises sufficient control, both direct and indirect, over the terms and conditions of their employment. The country club directly supervises the landscaping employees’ work and determines their schedules on what amounts to a regular basis. This routine control is further established by the fact that the country club indirectly fired one of landscaping employees for not following its directions.

 

The proposed rule will be available for public comment for a period of time before it, or any version of it, takes effect.  Here’s hoping the clear test that is set forth above is adopted, and employers get the clarity they need to accurately assess whether they are or are not joint employers due to the amount of control exercised.

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DOL Issues Notice Of Proposed Rule to Increase Overtime Threshold

The U.S. Department of Labor (Department) announced a Notice of Proposed Rulemaking (NPRM) that, if passed,  would make more than a million more American workers eligible for overtime. The NPRM would increase the minimum salary threshold to qualify for the Executive, Administrative and Professional Exemptions, often referred to as the “white collar exemptions”.

Under the current law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. This salary level was set in 2004.

This new proposal would update the salary threshold using current wage data, projected to January 1, 2020. The result would boost the standard salary level from $455 to $679 per week (equivalent to $35,308 per year).  The NPRM does not call for automatic adjustments to the salary threshold.

Importantly, the NPRM is not yet law.  Once the rule is published in the Federal Register the public will be able to submit comments for 60 days.  But, given that this increase is approximately $12,000 less than the Obama DOL’s proposed increase enjoined by the U.S. District Court for the Eastern District of Texas in November 2016, it likely has a very strong chance of becoming law.

Employers should prepare accordingly by auditing  exempt positions to ensure that the “duties test” is met.  Remember, if the duties test is not met it does not matter what amount of salary is paid.  Employers should also assess whether an increase to the employee’s salary in order to maintain the exemption is feasible, or if the better business approach is to reclassify the employee as nonexempt and pay overtime when it is required.

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Cyber Security 101

The Financial Industry Regulatory Authority or “FINRA” recently published its Report on Selected Cyber Security Practices.  FINRA is a self-regulatory organization within the financial industry, an industry that is highly motivated by information privacy and cyber security concerns.  When FINRA releases information and recommendations on these topics, we should all take notice. The Financial Industry Regulatory Authority, or “FINRA,” has recently published its Report on

The report highlights several areas of ongoing concern to many employers:

  • Establishing appropriate written information privacy and cyber security policies and procedures;
  • Maintaining security at branch or satellite offices;
  • Training employees to recognize and respond to phishing attacks;
  • Learning to detect and defend against insider threats (such as disgruntled employees);
  • Conducting reasonable security testing; and
  • Reducing the spread of malicious software via employee-owned devices.

Every employer depends on the availability of their computer systems daily and possesses valuable information such as trade secrets, proprietary business information, and personally identifiable information regarding their employees.  However, many employers, especially those that operate outside of the healthcare and financial industries, are often unaware of the information privacy and cyber security risks their organizations are exposed to, until a security breach or attack occurs.

To avoid making costly mistakes, employers in all industries should take a basic inventory of the information they possess and the risks posed by the release, interruption, or deletion of that information.  This inventory can then be used to make wise decisions concerning reasonable security controls, such as adequate user authentication and/or a “Bring Your Own Device Policy” governing employee use of personal electronic devices.

Additionally, policies should be drafted and implemented to avoid creating a result that may cause an insurer to deny a claim for damages in the event of a breach of security.  Policies should not generally be aspirational; rather, they must reflect controls that have been implemented.  For example, a company may intend to start requiring two-factor authentication to access certain company accounts, as required by its written policy, and fail to follow up with the necessary implementation.  If those accounts are compromised, an insurer may deny a claim because the company knew there was a heightened risk to those accounts and failed to adequately protect them.

Written policies should also include sufficient detail to provide appropriate security while allowing for reasonable deviation in implementation.  A company may be tempted to provide minute details regarding actions to be taken in response to a breach.  But, if the company fails to adhere to all of those detailed provisions, the insurer may find cause to deny payment for some portion of the company’s damages.

The cost of implementing most of FINRA’s recommendations will vary depending on a company’s needs and financial commitment to security.  Some companies justifiably strive to turn their network and computer systems into a digital “Fort Knox,” by implementing costly controls recommended by various organizations.  While that may not be possible for everyone, all companies can benefit from implementing controls that are appropriate and cost effective for their size and industry, including the controls discussed above.

Eliza Scott Jones is an associate with Woolf, McClane, Bright, Allen & Carpenter PLLC and a former computer programmer and security professional. She provides counsel for legal matters related to information privacy and cyber security.

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7th Circuit Holds Applicants Can’t Claim Disparate Impact Under the ADEA

On January 23rd the US Court of Appeals for the Seventh Circuit held that applicants cannot make a claim for disparate impact age discrimination under the ADEA.  Disparate impact discrimination occurs when a facially neutral policy has a disparate or disproportionate impact on a protected class of persons.

In March 2014 Dale Kleber, an attorney, applied for an in-house counsel position with CareFusion Corporation.  The job description required applicants to have “3 to 7 years (no more than 7 years) of relevant legal experience”.  Kleber, who was age 58 when he applied,  had more than seven years experience and was thus not selected for the position.  CareFusion hired a 29 year old applicant who met but did not exceed the experience requirement.  Kleber then sued claiming that the experience requirement created a disparate impact in violation of section 4(a)(2) of the ADEA.

In affirming the dismissal of Kleber’s case the Seventh Circuit focused on the plain language of section 4(a)(2) of the ADEA.  Section 4(a)(2) makes it unlawful for an employer:

“to limit, segregate or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.”

Since the relevant statutory language only protects employees the Court held that Kleber could not state a disparate impact claim.  In doing so, the Seventh Circuit joined the Eleventh Circuit in holding that a disparate impact claim is not available to applicants under the ADEA.  Other Courts of Appeals have held to the contrary.

While this decision is a win for employers it does not change the fact that:

  1. All employment policies, selection tests, and other selection procedures and criteria must be neutral on their face;
  2. These policies and selection procedures and criteria must not have a disparate or disproportionate impact on a protected class; and
  3. A disparate impact theory is still available to employees under the ADEA .

Remember, an ounce of prevention is worth a pound of cure!

 

 

 

 

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Not Every Job Restriction Pertains To An Essential Function

Earlier this month the Sixth Circuit U.S. Court of Appeals (the circuit that includes Tennessee) affirmed a jury’s verdict that Bemis Company discriminated against a former employee based on his disability when it terminated him based on his doctor’s restrictions.  The Plaintiff, Tony Gunter, was a press operator with the primary job duty of pressing graphics onto Huggies diapers.  Gunter injured his shoulder on the job.  The shoulder injury resulted in Gunter’s doctor imposing lifting restrictions on him.  Bemis terminated Gunter’s employment on the basis that his lifting restriction prevented him from performing the essential functions of his job.

At trial several witnesses testified that even with the lifting restriction Gunter could perform the essential functions of his press operator position.  In fact, Gunter’s co-worker’s testified that they regularly helped one another lift heavy objects, and thus the lifting restrictions would not impact Gunter’s ability to do his job.

Based on this testimony and other evidence the jury found that Bemis discriminated against Gunter based on his disability when it terminated his employment.  The jury awarded Gunter almost $600,000 in damages, but the Court of Appeals held that the front pay portion of that award needed to be recalculated.

Employers must remember that if an employment decision is based on an employee’s job restrictions,  those restrictions must prevent the employee from performing the essential functions of his or her job, even with a reasonable accommodation.  And remember, just because the job description says it is an essential function, that may not be the case.  Review the job description and make sure that the actual job duties are consistent with it before you make the decision.  The failure to do so could prove very costly.

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Is Regular Attendance Always An Essential Job Function?

Most of you just read the headline and probably answered “of course”.  But a recent decision by the Sixth Circuit Court of Appeals ( the federal court of appeals that has jurisdiction over Tennessee federal courts), shows that the answer is not always that certain.

In Hostettler v. College of Wooster the plaintiff, a full time HR Generalist, was seeking a part-time work schedule following the birth of her child.  When the plaintiff was unable to return to work on a full-time basis because she was recovering from post-partum depression and separation anxiety, the college fired her.  The plaintiff sued under the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act and Ohio statutory law.  The district court granted summary judgment to the college on all of Plaintiff’s claims.  The district court decided that Hostettler could not make out a prima facie case under the ADA because she could not meet an essential function of the position, full time work, and was thus not qualified for the job.

On appeal the Sixth Circuit reversed the decision because it found that genuine factual disputes existed on material issues in the case.  Several facts were key to the Sixth Circuit’s decision.  One of Hostettler’s colleagues stated in a sworn declaration that she believed that Ms. Hostettler could do much of her work from home and that working from home was a common practice in the department.  The colleague also stated that Ms. Hostettler was replying to work emails in the evenings when she was working a modified schedule prior to her termination.  The colleague further stated that while Ms. Hostettler was on a modified schedule she was not aware of any assignments that Ms. Hostettler failed to complete.

Another key fact was that on Ms. Hostettler’s performance evaluation that was completed shortly before she was fired she received no negative feedback.  To the contrary, the college stated that “Heidi is a great colleague and welcome addition to the HR team!”.  Given these facts, and others, the Sixth Circuit determined that summary judgment was not appropriate.

Importantly, the Sixth Circuit did not hold that regular attendance is not an essential job function.  In fact, in the 2015 decision of EEOC v. Ford Motor Company the Sixth Circuit reaffirmed that regular attendance often is an essential function of the job.  But in Ms. Hostettler’s case there were factual disputes that precluded dismissing the case without a trial.

There are a few significant employer take always from this decision.  The college focused heavily on the fact that the job description stated that regular attendance is an essential job function.  But the facts of the case were inconsistent with that statement.  So make sure your job descriptions are accurate.  Additionally, just because your job description says one thing, if the facts pertaining to that employee are inconsistent with the job description, don’t let the job description drive your decision.

Finally, the plaintiff was fired after receiving a glowing performance evaluation.  Anytime you look to fire an employee for performance based reasons make sure you review their entire personnel file, including the most recent performance evaluation, before going forward with that decision.  If the performance evaluation is favorable, or other recent documents indicate acceptable or good job performance, reconsider whether termination is appropriate.  And as always, when in doubt, call your lawyer.

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$9.45 Million Reasons Not To Disclose Terminations

Most employers know that terminations should not be publicized externally or internally except to those who have a legitimate need to know the information.  On April 30th a federal jury in Kentucky reinforced this rule when it found that Charter Communications must pay over $9.45 million for defaming seven former employees by telling other employees about the incident that lead to their firing.

In October 2013 Charter fired seven employees for taking printers purchased by the company to their homes.  The former employees claimed they had permission to take and keep the printers.  The former employees alleged that a month after their firing a Charter Human Resources Manager gave a PowerPoint Presentation in which he referred to the incident as “Printer-gate.”  They also alleged that the PowerPoint mentioned “Printer-gate” with one incident in which an employee allegedly used a company credit card to make personal purchases and another incident in which former employees allegedly sold illegal drugs on Charter property.  The former employees contended that the use of the term “Printer-gate”, particularly in conjunction with references to employee theft and drug dealing, implied that the employees had engaged in criminal conduct.

The jury agreed with the former employees.  The jury was particularly bothered by the company’s actions, since it awarded each former employee $1,000,000 in punitive damages.  Punitive damages are designed to punish a defendant for its wrongful conduct.  The jury also awarded each plaintiff an additional $350,000 for embarrassment, humiliation and mental anguish.

This case serves as a reminder that when you terminate an employee you should not disclose the details to anyone who does not have a legitimate need to know the information.  And those that have a legitimate need to know the information are a small group.  The failure to follow this rule could result in expensive litigation and, in a worst case scenario, you writing the employee a large check in settlement or to pay a jury’s verdict.

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6th Circuit Holds Firing Because of Transgender Status Violates Title VII

Last week the U.S. Court of Appeals for the 6th Circuit, which covers Tennessee, Michigan, Kentucky and Ohio, issued a significant Title VII ruling.  In EEOC v. R.G &G.R. Harris Funeral Homes the Court held that discrimination on the basis of transgender and transitioning status is sex discrimination in violation of Title VII.

The EEOC sued the funeral home after it fired an employee, Stephens, who was transitioning from male to female.  It was undisputed that Stephens was fired because he was “no longer going to represent himself as a man” and “wanted to dress like a woman”.  In 2016  a Michigan  District Court dismissed the case based on the Religious Freedom Restoration Act of 1993 (‘RFRA”),  because the employer’s sincerely held religious belief “is that a person’s sex is an immutable God-given gift”.  The EEOC appealed.

In reversing the District Court and rejecting the RFRA defense the Court of Appeals held that Stephens was fired because of her failure to conform to sex stereotypes, in violation of Title VII.   While this type of claim has been recognized under Title VII since 1989 when it comes to men and women not conforming to the traditional stereotypes for their gender ( e.g. “you are not feminine enough”‘; “you dress too masculine”), the 6th Circuit took it a step further with this holding:

Discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex, and thus the EEOC should have had the opportunity to prove that the Funeral Home violated Title VII by firing Stephens because she is transgender and transitioning from male to female.”

This is a landmark ruling that employers located within the 6th Circuit must adhere to going forward.  If you have questions about how it impacts your business, give us a call.

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DOL Announces Voluntary Payroll Audit Program

On March 6th the Wage and Hour Division (WHD) of the U.S. Department of Labor announced a new pilot program called the Payroll Audit Independent Determination  ( PAID) Program.  According to the DOL PAID is designed to expedite the resolution of “inadvertent overtime and minimum wage violations under the Fair Labor Standards Act “(FLSA).

Participation in PAID is voluntary.  If an employer chooses to participate in the program and FLSA violations are discovered the WHD will not impose penalties or liquidated damages as part of any settlement.  Instead, the employer will only pay the backpay owed to the employee or employees.

Employers may not participate in the program if they are in litigation (presumably involving the FLSA but the press release does not specify) or currently under investigation by the WHD for the wage and hour practices at issue.  Participation in PAID also requires employers to review the WHD’s compliance assistance materials, carefully audit their pay practices and agree to correct the pay practices at issue going forward.

WHD will implement PAID nationwide for approximately six months and will then evaluate the program and consider future options.  More information about PAID is available at http://www.dol.gov/whd/paid

For employers who believe they may have “inadvertent” violations of the FLSA participation in PAID may be a good option.  But before you agree to invite the WHD into your place of business I recommend that you conduct your own audit of your compensation practices to identify any potential violations or areas of concern.  We assist clients with self-audits frequently.   Remember, an ounce of prevention is worth a pound of cure!

 

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Shhh? Sexual Harassment Settlements May No Longer Be Deductible

The tax reform law that passed in December has been the topic of much discussion.  One aspect of it that has not received as much discussion is a provision which impacts whether a payment made as part of a sexual harassment settlement is deductible.

In response to the #MeToo Movement Congress included the following in the new tax reform bill:

No deduction shall be allowed under this chapter for – (a) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement; or (b) attorney’s fees related to such a settlement or payment.”

It seems clear that the intent of this provision is to remove the tax deduction from a payment made to settle a sexual harassment or sexual abuse suit  if the payment is subject to a nondisclosure or confidentiality agreement.   But several questions remain.

What if there are multiple claims being settled?  Is the entire payment not deductible if a confidentiality provision is included in the agreement, or just a portion of it? And will allocating a specific portion of the payment to the sexual harassment claim suffice, so that only that amount is not deductible?

What about the attorney’s fees? If a nondisclosure agreement is required is the deduction lost for all the fees in the case, or just the portion “related to such a settlement or payment”?

In most cases the settlement is subject to a confidentiality provision.  Congress has now given employers settling sexual harassment claims reason to pause before automatically making confidentiality a part of the settlement.  Remember to discuss this with your lawyer, and consider the pros and cons of silence verse the tax deduction,  before you make this decision.

 

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